Netflix News: Better signals for all, longform viewing up, Problems for CRTC

Netflix has been experimenting with improved streaming signals for a while, making the 3D and "SuperHD" video streams available to subscribers connecting through ISPs using OpenConnect (which promised higher speeds and no data limits).  Highspeed and no-limit connections are important to improved streaming,  Normal HD signals need 2-3 Mbps bandwidth for live streaming, while SuperHD (1080p instead of 1080i, and less compression) needs 5-7 Mbps, and 3D can require up to 12 Mbps bandwidth.

A couple of cable MSOs, who had previously announced that they'd put delays and/or data limits on Netflix programming (while not doing so for affiliated VOD services), claimed that Netflix was violating the principals of network neutrality (which in fact was what they were doing).  Still, the PR for Netflix providing improvements only to some subscribers wasn't good, so they've now announced that the higher quality streaming options will be available to all US subscribers.  They've also hinted at the possibility of adding 4K (Ultra HD) streams when content is available, likely sometime next year.

While not Netflix-specific, the latest Ooyala Global Video Index is showing continued rapid growth in the use of online video.  Some highlights:

• Mobile and Tablet viewing account for more than 10% of all online video viewing.
• More than 20% of mobile viewing time was for content more than an hour long (i.e movies, live sports)
• Tablet audiences spent more than half of their online viewing time watching premium long-form content (i.e. movies)

In the meantime, Netflix is creating issues for Canadian regulators. A new report from Canadian regulators CRTC reported that in 2012, a third of Canadians watched online TV regularly, and 17% of Canadians had Netflix accounts.  A more recent trade report indicated that 25% of English-speaking Canadians were Netflix subscribers, and 84% of them watched at least one TV show or movie a week on Netflix.  The report also indicated that 20% of Canadian streamed audio content, many from non-local sources.  While great news for Netflix, Pandora, and the like, Canadian broadcasters and networks, who are required to meet minimum requirements for Canadian content, fear that they're at a competitive disadvantage.  And they're protesting to the CRTC, hoping to get the local content rules reduced or waived.
  At a speech to a media industry group recently, CRTC vice-chairman Peter Menzies said that the commission could no longer act as a gatekeeper in a digital world that may no longer have gates.

"(We need to find a way to act) as an enabler of Canadian expression, rather than a protector.  We can't tell Canadians what to watch, nor should we."

Sources -  Netflix expands Super HD and 3D streaming to all of its members,  GigaOm
Ooyala Global Video Index: 2Q 2013, research report
One-third of Canadians watch TV Online, CRTC says,  CBC News
Communications Monitoring Report 2013,  CRTC report.

Netflix Optimistic about Internet TV

In a recent letter to shareholders, Netflix CEO Reed Hastings was optimistic about the future for online video.  His "Top 10" list of reasons Internet TV will continue to boom -

Ten Reasons Internet TV Will Grow from Reed Hastings
1. The Internet will get faster, more reliable and more available
2. Smart TV sales will increase and eventually every TV will have Wifi and apps
3. Smart TV adapters (Roku, AppleTV, etc.) will get less expensive and better
4. Tablet and smartphone viewing will increase
5. Tablets and smartphones will be used as touch interfaces for Internet TV
6. Internet TV apps will rapidly improve through competition and frequent updates
7. Streaming 4k video will happen long before linear TV supports 4k video
8. Internet video advertising will be personalized and relevant
9. TV Everywhere will provide a smooth economic transition for existing networks
10. New entrants like Netflix are innovating rapidly.

Source -  10 Reasons Internet TV Will Grow,  AppNewser

DVR, VOD changes TV viewing

Recent consumer research from Leichtman Research Group (LRG) shows that more than half of homes getting their TV from a multichannel video programming delivery service (i.e., cable, DBS, telco cable) have and use DVRs to record and watch TV programming, while only 4% of households without MVPDS (that is, rely on over-the-air broadcast stations and/or internet streaming for their TV programming).  Since about 90% of homes get MVPDS programming on at least one TV, that's a lot of U.S. TV households with DVR capability.  And 43% of DVR homes have DVR access to two or more TV sets in their home.
  In addition, the survey found that 70% of cable digital subscribers have used its VOD (video on demand) service to watch TV programs (compared to 58% in 2007 and 25% in 2004).  In addition, more than half (51%) of the MVPDS subscribers also subscribe to Netflix, the top on-demand Internet video streaming service.

  So now that DVRs, VOD, and on-demand Internet video streamers and other technologies that shift control over viewing time and conditions to audiences are fairly widespread, how do consumers like and use them?  What do consumers think about having the power to watch TV programs when and where they want?  LRG surveyed some 1300 U.S. households, and the LRG report concluded that:

“... the percentage of all TV households in the US with a DVR has... doubled over the past five years, and... expanding to more TV sets in the home... consumers are increasingly integrating DVR, VOD and On-Demand TV viewing into their TV viewing patterns... ”

More specifically,

• People really like having DVRs, with an overwhelming majority giving the service strongly positive ratings (8-10 ratings where 10 is excellent).  In addition, people prefer (give higher positive ratings) when they have DVR access on multiple TV sets (81% top ratings) than when they have DVR access from only one TV (71%).
• More than half of digital cable (59%) and Telco video (64%) subscribers have used their VOD service within the last month.
• More than a quarter (26%) of Netflix subscribers watch "Instantly" on a daily basis, and more than half (59 watch a movie or TV program "Instantly" at least weekly.
• More than two-thirds of VOD users strongly agree with the idea that having both VOD and DVR makes their TV service better.
• 79% of Netflix "Watch Instantly" users watch movies and TV programs on a TV set (as opposed to a computer screen or mobile device).

These reported results certainly suggest that most viewers like having more control over their TV viewing in the form of DVRs, VOD, and Internet video streaming services - and that having those tools helps to improve their perception of the value of their TV delivery service.  What's in the press report doesn't really get too much into changing behaviors, but a spate of current research is clearly establishing and increase in time-shifting viewing - enough to start a debate about what that means for TV advertising, and how to best measure and incorporate that viewing into ratings.


Source  -  The DVR Impacting TV Viewing and Satisfaction,  Research Brief

Netflix in the News - Still out to change the (TV) world

Earlier this week, Netflix and Disney announced a deal that will bring Disney and affiliated studio content to Disney.  But the big news was that Netflix will become the primary pay-TV outlet for future features.
  Older Disney fare had been available on Netflix through its deal with Starz, but that deal expired earlier this year.  Now, older content from Disney, Walt Disney Animation Studios, Pixar Animation, Marvel Studios and Disneynature will be available shortly, while new feature films will become available on Netflix when they move into the pay TV window (typically six months after the initial theatrical run ends. A spokesman for Disney indicated that content from Lucasfilm will be included once its acquisition is finalized, while noting that DreamWorks, while it uses Disney for theatrical distribution, will honor its current deal with Showtime as a pay-TV partner.  High profile direct to video releases (Tinker Bell, cartoon series, and shorts built on feature film characters) will come online in 2013.

  The deal prompted a piece in GigaOm by Janko Roettgers, who sees the strategy of going directly to content producers and distributors for streaming rights (rather than acquiring them as secondary rights from pay TV networks), along with other recent moves, as building a platform that could transform traditional TV.

Netflix doesn’t just want to compete with traditional pay TV networks like HBO, Showtime and Starz – it wants to change television forever. The company envisions a future for TV in which old-fashioned things like ratings, schedule and recaps simply don’t matter anymore.

 Roettgers interviewed Netflix's Chief Content Officer, Ted Sarandos, about the Disney deal and other recently announced deals - and what was behind the moves.  One of the moves is the decision to produce original content - last year Lillyhammer led the way, and two highly-anticipated TV series are set to launch February with original content.  One, a return of Arrested Development has been generating a lot of media buzz and fan chatter since the series' relaunch on Netflix was first announced.  The other series slated for February debut is House of Cards. But these days, a lot of channels (beyond the traditional broadcast networks) are airing traditional programming in the hunt for bigger and better ratings.
   Where Netflix is changing the game is in terms of its scheduling strategy - releasing all of a season's episodes at the same time.  Sarandos argues that ratings, and thus worries about scheduling, are irrelevant from Netflix's perspective (and business model).  Unlike commercial networks, a program's value is not determined by its ability to attract large simultaneous audiences.
   “The most difficult thing in linear television is the pressure on the time slot,” Sarandos said.  Some content works well on what he termed linear television (content is offered as a linear sequence of programs) - like sports, news, and talk.  “The immediacy of Jon Stewart…. lends itself to linear business models.”  However, he suggested that scripted content is different - it has a longer shelf life, and it comes closer to giving viewers the flexibility in viewing options they want (as seen in DVR behaviors), while avoiding scheduling conflicts and losing audiences if the network shifts the air times.  In addition, program creators like the ability to build storylines over episodes without having to recap the previous episode.
  Netflix's on-demand and subscription business model, he noted, is based on building the value of available content, and the choice and flexibility an on-demand model provides to its subscribers.  Thus, success for Netflix is not built on the popularity of any single film, content, or episode, but in providing access to programming that at least some of their subscribers want to watch. 

  In addition, Netflix learned from Amazon the value of developing a recommendation system that personalizes the service.  (They even had an open challenge/contest to develop a better systems).  A more formal differentiation is coming in its new "Just for Kids" interface - that allows parents to provide their kids with family-friendly programming.
  As that Netflix business model (programming strategy) continues to prove itself, it may transform TV viewing, if not TV markets.  Sarandos wasn't shy when asked about the future of TV -

“It’s gonna look nothing like we’re seeing today.”

Source -   How Netflix wants to change television forever,  GigaOm

Milepost: Netflix passes Billion-hour streaming

Netflix announced that its subscribers watched more than 1 billion hours of streamed video in June.  The growing use of Netflix by its 26.5 million streaming subscribers may be a reflection of recent efforts to expand its Internet library.  It also may presage a shift in overall viewing habits from advertising-supported entertainment to subscription-based access, according to an AP press report.

Source - Netflix subscribers' monthly viewing of Internet video surpasses 1 billion hours for 1st time,  Broadcast Newsroom.

Netflix overtakes Apple in Online Movie Market

Apple has dominated online movie business for years, at least in terms of revenue generation.  A new study by market intelligence firm IHS iSuppli suggests that Netflix has overtaken Apple to be market leader.

“2011 marked a sea change in the online movies business that saw the balance of consumer spending shift from a DVD-like transactional model to more TV-like subscription approach,” said Dan Cryan, research director for digital media at IHS. “The online movie business more than doubled in 2011 to reach $992 million and it is expected to double this year as well.”

Netflix saw its share of (U.S.) domestic online movie market grow from less than 1% in 2010, to earning more than 44% of the market in 2011, while Apple's share fell from 60.8% to 32.2%.  Amazon accounted for most of the rest of market revenues.

Source - Apple Overtaken By Netflix in Online Movie Revenue, MediaPostNews

After AppleTV Announcement - New Business Model for Netflix?

One of the lesser announcements in Apple's recent presser was that the new AppleTV software would let users subscribe to Netflix (and MLB) through iTunes, instead of dealing directly with Netflix. 

It’s a win for users and content providers. One of the challenges that companies such as Netflix face is getting subscribers to follow through with the sign-up process. It’s one thing when the content is primarily consumed on the Internet. For more passive devices — like the television set — a user who has to go to a different device just to sign up may end up putting off the purchase.

  On its own, and interesting but not too significant added feature.  But then Reuters reported that Netflix was also in talks with major cable companies about offering Netflix streaming service through their Video-On-Demand service. This is what DBS operator Dish Network is trying with the remnants of its Blockbuster acquisition - and what Comcast is promising with its Streampix streaming service.  Already, there are several niche streaming services available via separate subscription through VOD.  But with the wider content options and on-demand service, this could prove competitive with general interest channels, and even pay channels.  Starz was the first to recognize the potential, and offered streaming access of a month's worth of content to subscribers, and recently HBO entered the market with HBO Go.  HBO's even making deals with TV and OTT manufacturers to incorporate HBO Go access as an app.
  The pay channels, and many cable channels, have also attempted to become more than a content packager by developing its own original programming - providing consumers with unique content that differentiates them from other options.  Netflix is also starting to move in that direction, with recent deals to develop original programming for its streaming service.

As Netflix starts to shift away from just licensing content and tries its hand at creating its own original programming, it makes sense that the company could see itself as a kind of HBO-alternative, especially to cable companies that are looking to hold on to customers.

Netflix looks to be countering the increased competition in its streaming market by taking advantage of the increasing convergence of delivery technologies to expand into the premium channel market, and by working through multichannel programmer's VOD offerings and shared billings it is expanding its market range beyond those with connected TV's or OTT devices.  These moves should at least offset some of the loss from the entry of new competition in its primary streaming market.  And Netflix also has the separate business line of video rentals to help cover initial declines until it can establish itself in these new markets.

Source -  Netflix's Aoole TV Deal Could Signal New Business Model,  Mashable Entertainment blog

Netflix Really Regrets...

The reaction to Netflix's announced (then retracted) split of its streaming and DVD by mail services, combined with price increases, continues to impact Netflix, hard.
Netflix's third quarter reports indicated that subscription levels had dropped by 800,000 (down 3.25%).  The number was higher than expected, and Netflix indicated that they expect to continue to lose subscribers as a result of the price increases.  The report also indicated that Netflix expects business losses to continue throughout 2012 as a result of start-up costs related to its expansion into Ireland and the UK.  As a result Netflix stock prices have lost two-thirds of their value since peaking at $298.73 on July 13, 2011.

Source - Netflix drops most since 2004, Bloomberg.com News

Netflix reverses DVD-only split

Netflix, in blog post from CEO Reed Hastings, announced a halt to its plan to separate its streaming and DVD subscription services.  After three weeks of negative reaction from subscribers, and a 25% drop in its stock price, Netflix shelved its Qwikster plans  And in doing so perhaps avoided the biggest marketing blunder since New Coke. 
What's not being changed, however, are the new pricing plans announced over the summer - plans that would reflect a 60% price increase for about half of Netflix subscribers.  Dropping the plan to split may not be enough to stop the continuing decline, particularly as other streaming and DVD rental services bulk up their offerings.

Source -  Qwikster is Gonester: Netflix Kills Its DVD-Only Business Before Launch  AllThingsD

Netflix to split streaming, DVD services

Netflix has announced that it will be splitting its DVD rental side from the streaming portion of the business.

In a few weeks, the DVD-by-mail service will be rebranded as "Qwikster" (supposedly to emphasize the quick delivery system), and add a video games upgrade option similar to its current Bluray disc upgrade.  The press announcement indicated that there are plans for continued service improvements on the rental side.  Netflix will remain as the name of the streaming service.

The split will lead to separate websites for the two services, and separate billing, although the announcement indicates that subscribers to both will find that the two charges will be no higher than their current subscription prices (at least for now).

Source:  An Explanation and Some Reflextions, Netflix blog

Netflix, Apple show the way

Financial reports for the second quarter of 2011 are coming out, and I wanted to take note of two particular media firms: Apple, and Netflix.  Not only were the reports quite positive, but a large part of the gains are resulting from shifts from their initial product focus that reflect shifting trends in media and journalism.
Netflix reported that it's profits in the last quarter were more than 50% higher than the previous quarter, earning $68.2 million in profits from $789 million in revenue.  They also increased the number of subscribers to 25.6 million, securing its position as the video service provider with the largest number of subscribers.  Netflix began as a traditional DVD rental business (albeit distributing by mail rather than local stores), but reports that it's streaming business is outgrowing the DVD operation.  Netflix recently announced increases in subscription rates for the DVD side, but not its streaming operations; and while it expects some losses among DVD subscribers, they expect continued growth on the streaming side will more than cover any loss.
Apple's numbers were also up, significantly exceeding Wall Street's projected numbers.  Apple reported a net profit of $7.31 billion in the last quarter on revenues of $28.57 billion, numbers about double of last year's.  But looking below the aggregates, the gains represent the huge gains in sales of mobile devices (20 million iPhones and 9.25 million iPads in the last three months), and lower-than-expected sales of Macs (3.9 million).  Apple also reported continued growth in content sales.  In a shift from its early focus on computers, the new numbers reflect a growing dominance from the mobile side.  More than half of Apple's revenues derive from iPhones and related products and services, and profits and revenues from iPads were higher than what was earned from Apple's computer lines.
One other potential implication being discussed is Apple's reported interest in purchasing Hulu, the video streaming service begun by a combination of TV networks and movie companies.  Adding Hulu to the video content already available through the iTunes store, and a closer integration of Hulu with its mobile operating systems could make iTunes competitive with Netflix and Amazon as video distributors, particularly to mobile.
All these suggest the shift to mobile and content services as dominant trend.  And it's not just Apple; worldwide, sales of net-accessible mobile devices and tablets outstrip traditional desktop computers, and digital content sales is making significant inroads against other media distribution forms.

Sources: "Netflix Screens Good Results," MediaDailyNews
"Apple's Q3 Earnings Report: Digging Through the Details", The Mac Observer

IPTV Challenges Cable

More news on the emerging transition in TV from traditional broadcasting and multichannel services to IPTV..

Netflix is emerging as a driving force pushing IPTV.  A new study shows that Netflix users are twice as likely (this year as compared to last) to degrade or cancel cable subscriptions.  Meanwhile, content licensing is becoming more competitive, with Netflix making exclusive deals for TV programming.  While cable creates walled gardens limiting access to other services, and touts "TV everywhere" at some point in the future, Netflix is already there, with its service offered on more than 250 devices, some of which offer a dedicated Netflix button on the remote..
Meanwhile, a new report from Nielsen concludes that there's a new trend in homes with both TV and Interent access shows that

the lightest traditional television users streaming significantly more Internet video via their computers, and the heaviest streamers under-indexing for traditional TV viewership.  This behavior is led by those ages 18-34... while certain segments of the population are migrating toward specific services and viewing habits, the resounding trend is (for slight increases in total viewing across screens)

Nielsen's new C3 ratings are also showing significant numbers of additional viewers coming from online viewing.  A CNN executive reported that more than 50 individual telecasts saw significant ratings improvements with the addition of online viewers.
To pile on the bad news for traditional TV, a new Harris Interactive Poll for Adweek looked at media and online video use and attitudes towards the Internet's relationship to TV.  The results showed broad increases in online video use, with 77% indicating they've watched shows online.  Use was highest in the 18-34 demographic (at 88%), but remained high for all demographic segments, all the way through the 55+ segment (64% have watched).  In addition, about half indicated that they have watched shows online that they had not previously seen on TV, suggesting expanding choice options online.  Wide adoption of online video makes IPTV a stronger competitor to cable and DBS services.  In fact, 44% of respondents said they would cancel cable if they could get the shows they liked online for free.  That number falls to 16% if their shows were only available online for a small fee.  Still, at a time when cable has been losing subscribers consistently for years, and IP-delivered video choices are increasing (with AT&T's U-verse and the rise of streaming providers), of  it's not good news for cable and DBS.
If this wasn't bad enough, consider the continued maturation of user-generated-content (UGC) and UGC-sharing sites like YouTube.  Improvements in technology enable users to create higher-quality content.  In addition, YouTube and similar sites are providing opportunities for the distribution of professional quality content and traditional TV programming. The programming options and reach of UGC channels are only getting bigger, and a lot of content is getting better, making it a stronger competitor to traditional TV for both audiences and advertisers.
All these show an improvement in the access to IPTV, and improvements in its value coming from better content, more programming options, and more choice in when and where viewing occurs.  While cable and DBS can respond to some of these, an emphasize on keeping subscribers tied to their services is not helpful.  Look for a continued decline in cable and other multichannel services, and continued expansion of IPTV as a delivery system for video.


Sources:
"Who are we kidding? Of course it's Netflix vs. cable," Gigacom
"Heavy Streaming Vidoe Viewers Watch Less TV, Nielsen Says" Media Daily News.
"Turner Discloses Tens of Thousands Of Online Viewers Being Added To Its TV Ratings"  Media Daily News
"Survey: Sure, We'll Ditch Cable... Make an Offer!"  Vidblog
"UGC Is All Grown Up!" Online Spin

Netflix expands mobile base

Netflix is starting to release apps for a limited set of Android mobile devices, following on its success with the iPad/iPhone version.  This initial release is limited to devices running Android 2.2 or 2.3, and that have a sufficiently fast processor.  The limitation, according to Netflix, is Android's lack of standardization, which means that Netflix needs to test the app on individual devices to see if can support streaming without fragmentation issues.
Netflix recently became the video company with the largest number of subscribers (passing cable operators and satellite services), and further expansion into the mobile world of tablets and smartphones is likely to keep them growing, and on top.

Source: "Netflix on Android Shows First Signs of Fragmentation Problems," Connected Planet

Netflix to produce content

Topic from Samantha Bright -

Netflix has had a good year.  With help from their open challenge to better their recommendation formula, they've grown into the nation's largest video provider (in terms of subscriber numbers), and accounting for a large share of Internet traffic in the evening.  Continuing efforts at improving encryption and deals with Internet backbone providers has helped Netflix to reportedly cut the cost of streaming a movie in half, to about 2.5 cents for 2 hours of video.

More recently, Netflix bought the rights to several hit TV series, and announced a deal for their first original series, paying $100 Million for the rights to a hot new television property.

Source: "Netflix's Streaming Cost Per Movie Drops 50% From 2009, Expected to Spend $50M in 2011," Business of Video

"Netflix Buys TV Series Rights, Jumps into Content Creation Game," ReelSeo

Netflix to surpass Comcast

Netflix is on track to become the entertainment business with the largest number of subscribers.  Analysts are expecting Netflix to announce that it currently has 23.7 million subscribers, pushing it ahead of Comcast's 22.8 million and Sirius XM's 20.2 million.  Netflix's expansion, boosted by its embrace of digital streaming, is expected to top 30 million subscribers by the end of the year.
Analysis from NPD suggests that Netflix accounts for 61 percent of all movies viewed through the Internet, a level 8 times higher than number two (Comcast, again).  Netflix has also been aggressively securing its place in Internet-enabled TVs and other devices,  with apps for its streaming service included on more than 250 devices
Netflix currently offers more than 17,000 movie and TV titles for streaming, and has been in the news lately for acquiring rights to stream signature TV series, and is expected to spend more than $1 billion this year securing streaming rights..

Source: "Netflix to Become Largest Subscription Entertainment Business in U.S." The Hollywood Reporter